The catering giant Compass announced the planned departure of its chief executive yesterday while issuing its third profits warning in 12 months and giving notice of the £1bn-plus disposal of its travel concessions operation.
Mike Bailey will leave next year, completing a three-pronged shake-up at the top of the world's biggest caterer. He said he was taking "early retirement" aged 57 and would not receive any compensation.
The City took fright at a fresh round of profit downgrades and shares in Compass sank 11.5 per cent to 206p, a record low since the group was spun out of Granada five years ago. Compass blamed a number of problems in the UK for warning that pre-tax profit before exceptional items would be £40m below expectations at £580m. The impact of the London bombings, rising costs, pricing pressures, "subdued" trading and a sweeping redundancy programme will wipe one-third off its UK operating profits for this year, with its decision to scale back risky work in the Middle East also weighing on profits for the next two years.
It hoisted the "for sale" sign over Select Service Partner, which owns the Moto service stations in the UK and operates brands such as Upper Crust, Café Ritazza and Harry Ramsden's at airports and railway stations, to focus on its core contract catering operations.
Analysts at ABN Amro said: "Trading is tough and the recovery story is pushed back to 2007 and beyond." Mike Murphy, at Panmure Gordon, said: "Shareholders have been picking up the tab for an aggressive business model, an aggressive management and aggressive finances for years. I am bemused as to why they are selling SSP."
Mr Bailey said Compass would seek to keep the rights to its food brands as well as striking a purchasing supply contract to ensure it retained its economies of scale. The sale will improve the group's return on capital employedby 30 basis points. The bulk of the proceeds will pay down debt to ensure the group hangs on to its investment grade rating, with about one-third going to shareholders.
Compass has overhauled its UK management and changed its approach to winning business in an attempt to regain investors' confidence. It will no longer seek sales growth at the expense of margins - a move that will kibosh any chance of UK profits improving next year.
With the departure of Mr Bailey, three senior executives, including Don Davenport, the chief executive of its UK arm, will have left the company in a relatively short period. Andrew Lynch, its former finance director who runs its travel concessions arm, has stepped down from the Compass board to oversee SSP.Reuse content